UK commercial property investment up on 2016 in H1

A report by Savills shows UK commercial property sector in general good health but warns six sectors including retail warehouses and regional offices could feel pressure on yields. Louis Bearn reports.

International property firm Savills reports that UK commercial property investment grew 1% over the first half of 2017, despite the uncertainty following the unexpected General Election result. Average prime yields remained at 4.7% in June in response to continued uncertainty.

Savills reports that inbound UK commercial property investment peaked at £27.2bn for 2017, amounting to a 1% increase compared with a year ago. Office space attracted the highest demand, at 39% of investment in H1. Moreover, the firm highlighted a 50/50 split in investment volumes between London and the rest of the UK.

The report revealed that downward trends for current yields will be particularly evident in six sectors, however, with yields hardening for food stores, M25 offices, regional offices, retail warehouses, industrial distribution and industrial multilets.

“UK commercial property is in good health with investors continuing to be attracted by its underlying strengths. Indeed, volumes in H1 could have been higher, but have been held back by lack of sellers, rather than any reluctance from buyers,” said joint head of UK investment at Savills Richard Merryweather.

Savills expects total returns for the UK commercial property market to stand at 5.5% for 2017, with further improvements forecast.

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